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  3. year 0 year 1 year 2 year 3 year 4 cashflow for

year 0 year 1 year 2 year 3 year 4 cashflow for S -100 40 50 30 30 cashflow for L -100 10 10 50 90 If the company's cost of capital...

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Finance

year 0year 1year 2year 3year 4
cashflow for S-10040503030
cashflow for L-10010105090

If the company's cost of capital is 5% and the decision is madeby choosing the project with the higher IRR, how much value will beforgone?

a. $4.01

b. $20.80

c. $29.89

d. $1.79

e. $12.45

Answer & Explanation Solved by verified expert
3.8 Ratings (555 Votes)
Project S IRR is the rate at which NPV 0 IRR 0199347165 Year 0 1 2 3 4 Cash flow stream 100 40 50 30 30 Discounting factor 1 1199347 1438434 1725181 20690913 Discounted cash flows project 100 3335148 3476003 1738948 14499119 NPV Sum of discounted cash flows NPV Project S 0000105764 Where Discounting factor 1 IRRCorresponding    See Answer
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Transcribed Image Text

year 0year 1year 2year 3year 4cashflow for S-10040503030cashflow for L-10010105090If the company's cost of capital is 5% and the decision is madeby choosing the project with the higher IRR, how much value will beforgone?a. $4.01b. $20.80c. $29.89d. $1.79e. $12.45

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